November 26, 2025
Summary of Economic Activity
Overall economic activity in the Ninth District was flat since the previous report. Employment decreased slightly, and labor demand continued to soften. Prices increased moderately, and wage growth was modest to moderate. Manufacturing, commercial construction, and residential real estate activity increased. Residential construction, commercial real estate, energy, and agriculture were flat, while consumer spending decreased. Activity among minority- and women-owned business enterprises edged slightly lower on balance.
Labor Markets
Employment was down slightly since the last report. Surveys found that recent hiring demand continued to soften, and head counts dropped marginally. While normal seasonality played a role, contacts also noted recent or potential layoffs due to slower activity unrelated to cooler weather. A rising share of employers were not actively hiring, and more reported that some job openings would go unfilled. Retail firms expected subdued hiring for the holiday season, with one contact noting that "businesses will hire a bit, but perhaps less than the last few years." A Minnesota mall contact reported that "far fewer" tenants needed additional holiday labor, and related head count would increase by about half the normal number. Hiring in construction has slowed, but more than one-third of firms reported that they were still seeking additional full-time labor despite softening overall activity. Employers noted modest improvements in labor availability, with exceptions among foreign-born labor. An apparent increase in layoff anecdotes has not translated into higher jobless claims; initial unemployment claims in October remained below year-ago levels.
Wage growth was modest to moderate. Recent surveys suggested that compensation growth was similar to the previous month but was appreciably slower than last year. This was particularly the case for starting wages for new employees. There was, however, a notable uptick in benefit costs, with employers reporting large increases in health-care premiums.
Prices
Prices increased moderately, a faster pace of growth than the previous report. In a monthly survey, 29 percent of District firms increased the prices they charged to customers in October from a month earlier, and a similar share anticipated increasing their prices in the month ahead. Input price pressures were more pronounced. Business contacts continued to report increases in employee health-care premiums for the coming year. Meanwhile, a medical provider said insurance payments were not keeping pace with increased costs for medical supplies and labor. A brewery reported that aluminum can prices recently increased 18 percent. Retail fuel prices in District states were flat on balance since the last report.
Worker Experience
Workers across the region continued to experience a slowing labor market. The share of respondents to a quarterly District survey who reported being unemployed rose to four percent from three percent in the previous two quarters. Results also revealed that it may be taking longer for workers to find their next job. Confidence in job security dropped modestly, and the share of workers who said they were likely to stop working for reasons such as retirement and education dropped significantly from earlier in the year.
Consumer Spending
Consumer spending was lower. Retail contacts reported a decline in recent sales, and profits were even more negative. Contacts noted that higher-income customers were unconstrained, but "customers in the middle to lower end of the financial spectrum are tightening the belt," said one contact. Retailers in rural areas also had to deal with the fact that many farmers were cutting spending due to low crop prices and trade tensions. Expectations for holiday spending were modestly positive. New vehicle sales remained healthy, with some demand getting pulled forward, one dealer said, by customers' belief that "the price might go up and [they] want to avoid paying more."
Construction and Real Estate
Construction activity edged up slightly across most of the region, but preliminary results from a District survey revealed ongoing downward pressure on the sector. Firms continued to work through backlogged projects and struggled to secure new ones. Increased competition for new projects and labor availability were the two top concerns among respondents. The real value of permits for new construction also rose slightly, with ongoing strong contributions from projects in Rochester, Minnesota.
Commercial real estate was flat. Industrial space saw increased speculative development but also an increase in subleasing. Other real estate sectors have seen comparatively little new construction come to market, which was keeping vacancy rates, leasing activity, and rents at healthy levels for retail and multifamily properties. Office markets continued to struggle with high vacancy rates, and recent small improvements have stemmed mostly from transitions of office space to other uses. Residential real estate rose modestly. Closed home sales in October increased in a majority of markets compared with the same period last year; but a handful experienced slight declines.
Manufacturing
District manufacturing activity increased slightly on balance since the last report. Slightly more industry contacts reported increased orders than decreased orders in October from the previous month, but relatively few reported no change. An index of regional manufacturing conditions indicated that activity decreased in Minnesota and North Dakota in October from the previous month, while activity in South Dakota increased. Contacts continued to report that uncertainty about the economic outlook was causing hesitancy in purchases by customers. A producer of automotive inputs reported that sales remained strong but felt that their firm was the exception in that segment.
Agriculture, Energy, and Natural Resources
Agricultural conditions remained weak despite strong crop harvests in the District. Farm incomes in the third quarter fell from a year earlier for almost 80 percent of ag lenders, according to a recent survey; 70 percent reported that farm capital spending decreased. Contacts were hopeful but uncertain that a China trade deal might boost demand for bountiful soybean inventories. District oil and gas exploration activity was unchanged since the last report.
Minority- and Women-Owned Business Enterprises
Activity among minority- and women-owned business enterprises (MWBEs) edged slightly lower on balance. Employment and labor demand were mostly unchanged, and most adjustments made by businesses were due to seasonality. More than a third of contacts reported increases in input prices. A hospitality contact in Minnesota singled out coffee prices as "alarming." Expectations for activity in the coming weeks were modestly lower.
For more information about District economic conditions visit: https://www.minneapolisfed.org/region-and-community.